McAleese issues second profit warning

The McAleese Group, owner of Cootes Transport, has issued its second profit warning in two months, saying trading in the March quarter has been more difficult than expected due to safety breaches and falling demand for its heavy haulage services.
AFR

by
Jenny Wiggins

McAleese
, owner of
Cootes Transport
, has suffered another plunge in its share price after it issued its second profit warning in two months.

McAleese’s shares hit a new all-time low of 43.5¢, down 15 per cent, after it said trading conditions in the three months to March had been more difficult than expected due to further safety breaches by its Cootes tankers and falling demand for some of its haulage services from oil and gas groups.

The trucking group has been struggling to regain credibility with investors following a fatal accident involving one of its Cootes fuel tankers in Sydney last year. It said sales revenue for the March quarter would be $9 million less than forecast internally while earnings before interest taxation depreciation and amortisation would be $7 million lower.

The profit warning is another blow for McAleese investors, with the company’s stock having lost two-thirds of its value since listing on the Australian Securities Exchange in November at $1.47 per share.

McAleese CEO
Mark Rowsthorn
, who has declined repeated requests for interviews in recent months, declined to comment further after issuing a press release on the trading update.

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“Mark has been clear in his statement to the market and his focus is now on working with investors and management," a McAleese spokesperson said. McAleese did not change its full year EBITDA guidance, which was cut to $107.5 million from $126.8 million in February, but said it would update its outlook next month.

Cameron McDonald, analyst at Deutsche Bank, has already cut his estimates of McAleese’s full year EBITDA by $10 million to reflect the profit warning amid expectations of further deterioration in earnings in the final quarter of fiscal 2014. Deutsche Bank also reduced its target price on McAleese’s stock to 80¢ from $1.10 but retained a “buy" rating because it believes the transport group, which is trading on a fiscal 2015 price/earnings ratio of five times earnings, is cheap.

Increased investment in Cootes fleet

Mr Rowsthorn, who owns almost 30 per cent of McAleese, blamed the March quarter’s earnings declines on increased investment in the Cootes fleet to improve safety and a drop in tanker availability after trucks were temporarily hauled off the roads by regulators. But he also cited higher costs in McAleese’s resources division, which is struggling to keep up with demand from miners, as well as “faster-than-expected" drops in demand for its heavy haulage services from liquified natural gas projects in Queensland.

Mr Rowsthorn claimed a $15.4 million purchase of the
WA Freight Group
, which provides express trucking services between capital cities, would help diversify the company away from the resources sector and expand into other sectors such as consumer goods.